I have a successful small business making custom quilts. The business is almost 7 years old, and has been profitable every year. I have a staff of 8 quilters besides myself. I now want to move the business to a retail location (I'm currently working out of my walk-out basement studio with 2-3 employees coming and going during the week). If I get a retail space, I'm considering expanding the business to include quilting fabric and notions for sale.

Lease or buy the space?
Sources for grants? (Woman-owned business grants would be even better)
Sources for loans?
What type of space?
Pros and cons to moving?
What am I not thinking of?

EDIT: The retail space would be primarily a quilt shop - selling fabric - with the custom quilting business behind the scenes, in the back of the space. The employees would be working on creating quilts between walk-in customers. The basic goals are to have a more professional space for local clients to place their quilt orders (not walking down our house's basement stairs avoiding a dog and two cats), and to expand the business to also become a retail quilting supplies store. I have plenty of business with the custom quilting company (6 figure sales annually), so getting more custom quilt business is not really the point.

establishing a brick and mortar store for such a niche product seems pointless to me. if you need more space rent an old warehouse or some other appropriately sized space. storefront property will cost more. why not just double down on online advertising? i don't see a retail space as providing anything other than a place to read magazines during the long stretches between customers.

I know of a place similar to this in the previous town I lived in; it was more retail, less people sewing. What you're describing is very similar to a manufacture and a retail outlet. If you notice, there are no (major) stores actually making the product in the same location where they are being sold. It would distract the workers and kill the vibe of the store. If you must combine the two, make sure they are separate; retail in the front with manufacture in the back - or in two different locations. What you may want to include (if you go with a brick and mortar) is a place for education. Think about what Home Depot does; have your pro-quilters give workshops for amateurs in your retail space or videos for the online store.

While the conversation died, the shop did not! I've happily moved into a historic home in our little downtown district. Patchwork Memories is alive and very well, and Cary Quilting Co. Is set for a 1/26/13 grand opening, with online sales already started. :)

Grants are unlikely unless you are a nonprofit. SBA loans might be possible depending on your local lending environment and credit. The long history should help. sba.gov is a place to start.

Generally lease the space unless there are super deals. Commercial space is cheap right now but it doesn't sound like you need specialized space and this is your first time with it. It's easier to change your mind to buy instead of selling someplace that doesn't work for you.

Pros: you might see more sales, getting people out of your basement, in theory you might be able to set things up to be more efficient in terms of quilts/hour/person, nicer environment for customers and employees.

Cons: Costs of moving (commercial costs are ridiculous. You'll have to pay for stuff like occupancy permits, deposits for gas, electric, space renovation, trash pickup sometimes, business property tax, $150 a month per phone, insurance changes, you're responsible for stuff like the AC units, etc., etc.), costs of having your quilters not quilting while everything is moving. Annoyances (You'll get constant phone calls from everyone trying to sell you crap as soon as you move, the contract for power, water, trash and property never seem to line up right)

A brick and mortar store is going to be expensive and I'm not sure you'd get enough walk-ins to warrant that expense. (Although the expenses are deductible from your tax liability). I think you'd be better doing an online store and just do more local advertising.

My first thought is to invest more in Google adwords and try to drive up sales that way. If you are dead set on retail space you can try and partner with some local retailers to get your products on the floor. I don't want to dishearten you or discourage you but retail space is expensive and often provides a weird environment to house non-sales employees. You could consider something chic/modern and move towards a warehouse/studio environment where you can quilt with people and have a bit of a showroom but not retail specific.

But that is my first impression, here are some questions to better understand what you are doing:

Who are your customers?
How much business to get via word of mouth vs internet traffic vs tradeshows etc.
Whats your average sale price? How often does it happen?
How many pieces do you make a day/week/month?

The customers would be two types - non quilters who want a custom quilt made, and then quilters, who would be shopping for fabric and quilting supplies. In the quilting world, word of mouth is key, so my retail customers would know of the business from friends and cheap advertising via the local quilt guilds, and would shop with us because there's not another quilt store for 20+ minutes of driving from here, and because we hope to have a huge selection of fabrics. The custom quilt clients come primarily from online advertising (we get packages from all over the US), and word of mouth from local friends who had had quilts made.
As far as sales, we have always had a backlog of orders since day one, we have 35 orders in-house right now, so we're never bored. We sell about $8500 worth of custom quilts a month on average (more in May June November December, less in other months), and the average selling price is probably $600-$800 per quilt.

You've received some solid advice here, but i would like to weigh in on the subject if I may.

First off, the incarnation of your business you are envisioning is viable, just not at this stage. You should instead determine whether or not the larger workspace (for production only) is actually necessary. An inability to keep up with demand is really the only mitigating factor in this scenario. If you do need the space, lease warehouse space that fits your needs with a little room to spare for an extra workstation or two. The cost of bringing a building up to code or keeping one there will cut into retained earnings. You may be able to get a good deal if you rent and repurpose a non-warehouse commercial space that has been on the market awhile; just be sure that you will be able to meet any legal (code, zoning) obligations before renting.

If demand is not there, spend your time and money on increasing your sales online and locally. For the Internet, SEO and especially SEM are necessary, but you should also utilize sites like etsy if you don't already. Locally (better yet regionally), set up shop at flea\farmers markets and community events where your product will reach its target audience. Likewise, you can approach local businesses about carrying your line if your clientele shops there. If you're willing to sell out of your home, build a clothesline display unit for your front yard that you can break down everyday. You can attach a remote doorbell unit to it so people aren't knocking on the door all day and even use a rope lock to prevent theft. Just be sure to consult with your neighbors and local laws before doing it.

When demand increases from these efforts, you could then explore renting a storefront with or without a warehouse; though with would be better. Considering your product, location would have to be carefully researched; I would highly recommend opening next to a well-established business that appeals to the same target audience. Just like one's living situation, when the cost to own becomes a better investment than renting, then it's time to buy.

If money is holding you back from meeting demand, there are plenty of grants available to women at the federal, state, and local levels. Most are "women and minorities" grants that will require you to have a business plan written up and may only be available to either start-ups or businesses with proven success for X years. Contact the SBA, your local chapter of SCORE, your local chamber of commerce, any local business incubators, and any other relevant organization you come across.

What about a location in a commerce business park - it's not like a downtown store but much less expensive. You really have to weigh the high cost of prime retail with how many people you think would not only visit, but would also buy (many people go online after they check prices in a store). Getting locked into a annual prime retail lease can be a real drag... take baby steps.